The vast majority of crypto providers have no regulatory support, according to Sultan Meghji, the former chief innovation officer (CIO) of the Federal Deposit Insurance Corporation.
Meghji, now a professor at Duke University’s Pratt School of Engineering with a focus on artificial intelligence, Web3 and cybersecurity, told CoinDesk during “First Mover” that because the U.S. does not have a regulatory regime in place for crypto, it is using enforcement action to get a handle on overseeing nonregulated entities.
When asked what crypto investors can rely on today, Meghji said, “Frankly, nothing” in the current regulatory environment.
Sultan’s comments on regulation follow crypto broker Voyager’s recent bankruptcy filing, which included language suggesting user accounts were protected by the FDIC, something the FDIC denies.
The independent agency is responsible for ensuring banking stability in the U.S. and protecting a user’s account for up to $250,000 in the event of a bank collapse. Voyager, however, is not an FDIC-insured bank.
In the past, Meghji said, the FDIC has “come down hard on non-regulated entities” that insisted they were protected in some way by the U.S. government, despite not being insured directly by the agency.
Voyager is among the crypto companies that do not work directly with the FDIC, but through a “banking partner offering banking as a service.” In Voyager’s case, the Canadian-based firm was working with New York-based Metropolitan Commercial Bank.
“There’ll be some degree of protections there,” Meghji said about crypto-based firms that have a U.S. dollar account with a bank as a service provider, citing Voyager as an example.
Meghji added that because there is little to no regulatory support for the vast majority of crypto providers, it is important to find ways for “responsible crypto actors to get inside of the regulatory perimeter.”
When asked about current regulatory proposals – including a crypto-friendly bill by Sen. Cynthia Lummis (R-Wyo.) and Sen. Kirsten Gillibrand (D-N.Y.) and an announcement made Monday by the Financial Stability Board (FSB) that it would propose crypto regulations ahead of the G-20 meeting in October – Meghji said they’re interesting but only a subset of key points outlined in each is likely to be implemented.
Meghji underscored the need to remember the regulatory regime in the United States is quite different when compared with other countries, and that “it will take a while for those standards to be adopted into the American system.”
“It wouldn't be out of the realm of possibility that we don't see any actual action on this until after the 2024 presidential inauguration,” he said.
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